The role of life insurance companies in the development of the bond market in Vietnam

Abstract

Business activities of the life insurance companies include insurance and saving. The companies are supposed to mobilise an important source of available long term capital for the economy and use it to invest in various areas. To meet an increasing demand for capital to pay insurance commitments, the life insurance companies find to invest in low-risk long-term properties. Bonds are characterised as their most suitable investment properties In reality, despite a steady increase in capital related to life insurance industry in our country, there has been just a little participation of the life insurance enterprises in the bond market. They are not yet actually interested in such an investment, and the bond market, therefore, has been so gloomy. Such a situation stems from the fact that stocks are not much attractive in a incomplete market while life insurance companies have not worked out seriously an investment strategy. To promote the role of life insurance in developing the bond market, it is necessary to take different measures including, first of all, diversifying stocks to make them more attractive. For its part, the State should build up mechanisms to encourage life insurance companies in bond investment. Economic Studies Vol.295(12) 2002 p.1-11